Persistent Ex-Client Loses Bid to Punish Morgan Stanley Brokers
Chalk one up for a pair of Morgan Stanley brokers fighting to keep their regulatory records clean, and the Honolulu-based arbitrator who labored on their case for more than two years.
Finra arbitrator Arocles Aguilar on Tuesday ruled in favor of Morgan Stanley and brokers Douglas Ingham and Daniel Gieske’s requests to expunge from their records a former client’s claim for damages and allegations of poor execution against one of the brokers who erroneously bought a U.S. Treasury note in the client’s restricted account.
The case is notable because customers involved in resolved arbitration claims rarely expend time and money to oppose expungement requests, according to plaintiff’s lawyers, and because the arbitrator baldly dismissed the customer’s complaints as false.
The former client, Richard Koerner, is an Australian citizen who worked for about 18 years in the U.S. and who opened an advisory account with Ingham, a broker in Morgan Stanley’s Menlo Park, Calif., branch, in 2012.
In the summer of 2015, the same Honolulu-based arbitrator ruled against Koerner’s request for a $49,000 award against Morgan Stanley and Ingham for having putting his IRA on liquidation-only status in 2013. Aguilar at the time also ordered expungement of the claim from Ingham’s record because the broker was on military assignment in Afghanistan when Morgan Stanley legally barred purchases in Koerner’s IRA, according to the earlier ruling.
In this week’s decision turning down a 2016 claim from Koerner for $10,127 for being restricted from buying TIPs in his IRA, Aguilar ruled that even though Ingham’s Central Registration Depository and corollary BrokerCheck records are already clean because of her earlier ruling he and Morgan Stanley sought expungement “out of an abundance of caution….in the event that Finra deems this event reportable.”
She also awarded expungement to Gieseke, who monitored Koerner’s account while his colleague was in Afghanistan and who Koerner had accused of executing an unauthorized buy order of the Treasury note when he had wanted to buy Treasury Inflation Protected Securities.
“The evidence showed that this purchase request was made during a telephone conversation between Claimant and Respondent Gieseke; that Respondent Gieseke was not aware that there were trading restrictions on the account at the time; that Claimant received a trade confirmation following the purchase and the Note appeared on Claimant’s monthly account statements, and there was a net gain of approximately $41,477.00 when the Note was sold on August 8, 2015,” Aguilar wrote in her March 14 award decision.
She made her expungement decision following a February 27 telephone hearing on the issue with Koerner, his Australian-based lawyer, the two brokers and their Menlo Park complex risk manager.
Brokers succeeded in expunging customer misconduct awards from their records in 87.8% of their requests to arbitrators in the three years ending on December 31,2014, according to a study from the Public Investors Arbitration Bar Association, a trade group for plaintiff’s attorneys. PIABA lawyers have said that one of the principal reasons for such success is the unwillingness of clients to spend more money on paying their lawyers to oppose brokers’ records once an arbitration is over.
Kernel did not immediately respond to an e-mailed request for comment.